According to the American Psychological Association’s 2015 Stress in America: Paying With Our Health survey, money was named as the top source of significant stress, and has held the number-one spot since 2007. Ahhhhhhh! Why is money so stressful?!
While you can’t melt away the money tension with mere wishful thinking, there are ways to lessen its impact. We’re going breakdown the main sources of financial burden and help you make a plan that transforms that stress into goals that can be achieved, step by step.
Stressor No. 1: Debt
The key to maintaining your debt-payoff motivation is to give yourself the freedom to start fresh and move forward — rather than dwelling on the guilt that you associate with your past expenditures.
Getting Started: For one, check your credit report for free on a site like annualcreditreport.com to 1) get a bird’s-eye view of all the outstanding debt you have; and 2) to make sure there aren’t any errors or instances of identity theft that could be blemishing your credit history. (The more marks you have on your report, the less likely you’ll be to nab good terms on future loans or lines of credit.) You can also check your credit report for free when you log into Online Banking and our Mobile Banking App.
Then make a list of all your outstanding debt, including key stats like how much you owe, your minimum-payment amounts and the interest rates you’re being charged. Set the minimum payments on autopay so you’re never late on a bill, and if you have room in your budget to throw extra at any debt, focus on one loan or line of credit at a time, starting with the one that charges the highest interest rate.
Staying on Track: If you have multiple monthly payments, you may consider consolidating your debts into one loan that’s easier to manage. Our Listening & Lending program has helped so many of our members get out of the debt cycle. It places less emphasis on credit scores and more importance on you, your life, your entire financial situation and your long term goals and dreams.
To stay motivated and stick to your goals, celebrate your achievements, no matter how small. As long as the reward doesn’t throw your debt goals off track….then it’s time to work toward your next milestone.
PRO TIP: If you get extra money, like a tax refund or a bonus, decide before the money hits your account on a percentage that will go toward that debt.
Stressor No. 2: Financial Emergencies
Car breakdowns and leaky roofs happen when you least expect them, and if you don’t have a cushion of cash to cover them, you can feel particularly vulnerable. And yet some people may find the whole idea of building up a rainy-day fund just as stressful as any of those Murphy’s Law moments because it’s yet another goal you have to commit your money toward.
But think of it this way: An emergency fund can not only provide cash for when you really need it, but it’s one of the keys to helping you stay out of credit card debt for good!
Getting Started: Try opening a high-yield savings account to serve as your emergency fund. Then set up weekly automated transfers to that account, even if it’s as little as $10 a month. Your initial goal should be to save one month’s worth of your take-home pay. It’s a good basic level so someone feels they can weather some curveballs — a roof repair, a broken water heater and so on — without having to use their credit card.
Staying on Track: If you need an extra motivational kick to save, make a list of the reasons you think you’d have to access your emergency fund: car repairs, trips to the ER or even getting the pink slip. (What’s not included on this list, by the way, are things like last-minute weekend getaways and wedding gifts.) Seeing the types of emergencies that could strike can help you understand more clearly what you’re working toward and help you experience more peace of mind should a disaster occur.
Then review your progress every six months to see how your emergency fund has grown. Ideally, you’ll want to work toward saving about six months of your net income, although it could be slightly more or less than that, depending on whether you have a financial safety net (like family or friends who could help out in a pinch) and how steady your income is.
Although this account should stay largely out of sight and out of mind, it’s important to check in periodically to see how it’s growing.
Stressor No. 3: Retirement
Retirement is probably one of the biggest things that any of us will save for. And if you’ve ever run your target retirement number, the sheer size of it may be enough to make you want to put your head in the sand. But keep in mind that the sooner you start, the more time you have to take advantage of compound growth.
Getting Started: First, check with your company to see if they offer a retirement plan, and whether that plan includes an employer match. If possible, try to maximize the match.
If you’re not offered a plan, start researching your other options, such as a traditional or Roth IRA, making sure to take into consideration how each type of account treats taxes and what might be best for your situation. (In a nutshell, traditional IRA contributions help lower your taxable income now, but you pay taxes when you make withdrawals in retirement. Roth IRA contributions are post-tax, but you don’t pay taxes on your retirement withdrawals. And note that no matter what type of retirement account you choose, you could face IRS penalties for making withdrawals before retirement age.)
Then, make a commitment to set aside a specific portion of each paycheck into that retirement account — even if it’s as little as 1%.
Staying on Track: Take advantage of the Investment Services resources at the credit union. We’ll help you get started on build an investment strategy that works and changes over time for you. It’s important to take a look at your investment mix periodically to make sure your money is working as hard as possible for you and reflects your tolerance for risk and intended time to retirement. And try not to be too swayed by the financial headlines, which can lead to impulsive decision making.
Focus on the activities and not the outcomes. If you have any questions about how to tackle some of the financial stress from your life, tell Member Services your story and get some relief!